Despite real
annual growth rates exceeding 4% during the 1990s, macroeconomic
imbalances which have precipitated an economic crisis, threaten
economic growth and could endanger the continuation of trade and other
structural reforms, according to a WTO report on the trade policies
and practices of Ghana.

The WTO
Secretariat report, along with the policy statement by the Government
of Ghana will serve as a basis for the second trade policy review of
Ghana by the Trade Policy Review Body of the WTO on 26 and 28 of
February 2001.

The report
notes that faced with a looming economic crisis, the Government began
implementing corrective measures in 1998. An annual monetary growth
target of 18% was introduced to control inflation, which fell to 12%
in 1999. Fiscal measures taken to reign in the deficit included the
re-introduction of a broad-based 10% value-added tax, increased to
12.5% in 2000. Tighter spending controls were also applied. The budget
deficit fell to 6% in 1999.

However,
says the report, measures came too late to avert the economic crisis.
The Government's economic outlook was revised downwards in the 2000
Budget. Large budget deficits are set to continue, and the target for
achieving fiscal balance has been shifted beyond 2001. These deficits
will strain the financial system, generating resurgent pressures on
inflation, interest rates, and the external balance.

The
report says that trade and foreign direct investment (FDI) are
essential to Ghana's economic development. Merchandise exports and
imports as a share of GDP have expanded substantially, from 18% and
29% in 1993 to 28% and 39%, respectively, in 1998. Trade is relatively
concentrated, both in commodities and markets. Primary products,
overwhelmingly gold and cocoa, account for most exports.
Non-traditional exports, including, processed food, timber, and
aluminium products, account for 20% of exports, up from 3% in 1986.
However, export diversification has slowed. Most manufactured
products, along with machinery and other inputs, are imported. Ghana's
main trading partner remains the European Union (EU), accounting for
almost half of total exports — partly due to trade preferences —
and imports. Within the EU, Italy has overtaken the United Kingdom and
Germany as the main export market. Italy, the United Kingdom, and
France are the main European source of imports.

Ghana,
a founding member of the WTO, accords at least MFN treatment to all
its trading partners. Around 15% of its tariff lines are bound, mostly
in agriculture. Its GATS Schedule covers commitments on certain
services, including tourism, maritime transport, construction, and
education. Ghana also participates in the agreements on Basic
Telecommunications and Financial Services. It is an observer to the
Plurilateral Agreement on Trade in Civil Aircraft, and is neither a
signatory, nor an observer, to the Agreement on Government
Procurement.

The
tariff remains Ghana's main trade policy instrument. The simple
average tariff had fallen from 17% in 1992 to 13% on January 2000,
when the highest duty rate, levied on consumer goods, was reduced from
25% to 20%. However, the average tariff rose to its current level of
14.7% in February 2000 when a “special import tax” of 20% was
re-introduced, covering some 7% of tariff lines. This raised tariffs
on many, mostly consumer goods to 40%, well above their previous rate
of 25%. This contradicts the Government's policy objective of lowering
average tariffs to below 10% within the next three years.

Ghana
is heavily dependent on agriculture, especially cocoa, and on natural
resources, notably minerals. Primary production accounts for almost
half of GDP; agriculture, at 40%, is the most important sector.
Manufacturing contributes some 10% of GDP. Services are the second
largest component of GDP. Many basic infrastructure services, such as
electricity, ports, and water, are provided by state-owned statutory
monopolies. Basic telecommunication services are supplied by a
statutory duopoly following licensing of a second national carrier in
1997. These arrangements have had only limited success in promoting
telecommunication services: neither carrier has met its network
expansion or service quality target. The Government will consider
allowing additional carriers from March 2002. The market for
value-added telecom services is open. The National Communications
Authority was formed in 1997 as the independent legislative regulator
to promote fair competition and enhanced efficiency.

Ghana
generally applies its trade policies and measures on a
non-discriminatory basis, granting at least MFN treatment to all its
trading partners. Pursuing MFN liberalization while expanding its
bilateral arrangements and deepening regional integration, would
maximize benefits, and help guard against any possible trade
diversion. Reliance on ad valorem tariffs, which are being
rationalized, as the main trade instrument contributes to a more
transparent trading regime. Extending the coverage of tariff bindings
beyond agriculture would benefit Ghana and its trading partners by
increasing the predictability of the tariff. Continued structural
reforms, including further trade and investment liberalization, can
improve the economy's flexibility and growth prospects.

However,
the economy remains relatively weak and vulnerable to external
commodity price movements and other shocks, such as weather
conditions. Current economic difficulties, both internal — including
the large budget deficit — and from abroad, are placing extra
pressures on the economy which may weaken the Government's resolve for
trade liberalization. Ghana's enhanced commitments to the WTO and
compliance with its obligations can help sustain such unilateral
reforms. However, Ghana's trading partners can greatly assist its
reform efforts by ensuring stable, increased access to their markets,
especially in agricultural products where Ghana's comparative
advantage appears strongest.

Note
to Editors

Trade
Policy Reviews are an exercise, mandated in the WTO agreements, in
which member countries' trade and related policies are examined and
evaluated at regular intervals. Significant developments which may
have an impact on the global trading system are also monitored. For
each review, two documents are prepared: a policy statement by the
government of the member under review, and a detailed report written
independently by the WTO Secretariat. These two documents are then
discussed by the WTO's full membership in the Trade Policy Review Body
(TPRB). These documents and the proceedings of the TPRB's meetings are
published shortly afterwards. Since 1995, when the WTO came into
force, services and trade-related aspects of intellectual property
rights have also been covered.

For
this review, the WTO's Secretariat report, together with a policy
statement prepared by the Government of Ghana will be discussed by the
Trade Policy Review Body on 26 and 28 of February 2001. The
Secretariat report covers the development of all aspects of Ghana's
trade policies, including domestic laws and regulations, the
institutional framework, trade policies by measure and by sector.

Attached
to this press release is a summary of the observations in the
Secretariat report and parts of the government policy statement. The
Secretariat report and the government's policy statement are available
for the press in the newsroom of the WTO internet site (www.wto.org).
These two documents and the minutes of the TPRB's discussion and the
Chairman's summing up, will be published in hardback in due course and
will be available from the Secretariat, Centre William Rappard, 154
rue de Lausanne, 1211 Geneva 21.

summary

Since the
early 1990's, the Republic of Ghana has sought extensive reforms, in
an effort to reverse previous inward-looking policies. Trade and
investment liberalization has been integral to reform, and has
continued since Ghana's previous review in 1992. Government policies
are now focused on making Ghana the Gateway to West Africa.

Ghana
achieved real annual growth rates exceeding 4% during the 1990s.
However, macroeconomic imbalances have again precipitated an economic
crisis. This threatens economic growth and could endanger the
continuation of trade and other structural reforms. Evidence of this
danger is reflected in some backsliding on tariff reductions and
slowed privatization.

Economic
environment

The
economy shows large budget deficits, the core of Ghana's present
economic difficulties. Fiscal deficits re-escalated sharply during the
mid 1990s to 10% of GDP. Funded mainly by central bank borrowings,
these have severely strained public finances and the banking sector.

Excessive
money supply growth fuelled inflation, which peaked at 60% in 1995,
and exacerbated rising real interest rates. Business investment fell,
and private sector growth, “crowded out” by the public sector,
stagnated. Ghana's international competitiveness declined due to real
appreciation of its currency (cedi), propped up by sizeable Central
Bank intervention until late 1999. The cedi has since depreciated
nominally against the U.S. dollar by some 100%.

The
economy's fragility and vulnerability was exposed by recent external
shocks, culminating in a critical balance-of-payments position.
Sharply deteriorating terms of trade, reflecting falling world prices
for Ghana's main exports — cocoa and gold — and rising oil prices,
as well as Central Bank intervention, drained foreign reserves to
tenuous levels. Economic difficulties seem to have been compounded by
problems of governance and weak institutions.

Faced
with the looming economic crisis, the Government began implementing
corrective measures in 1998. An annual monetary growth target of 18%
was introduced to control inflation, which fell to 12% in 1999. Fiscal
measures taken to reign in the deficit included the re-introduction of
a broad-based 10% value-added tax, increased to 12.5% in 2000. Tighter
spending controls were also applied. The budget deficit fell to 6% in
1999.

However,
measures came too late to avert the economic crisis. The Government's
economic outlook was revised downwards in the 2000 Budget. Large
budget deficits are set to continue, and the target for achieving
fiscal balance has been shifted beyond 2001. These deficits will
strain the financial system, generating resurgent pressures on
inflation, interest rates, and the external balance.

Ghana
remains a highly indebted developing country (with a GDP per capita of
US$390 in 1998), heavily dependent on external concessional financing.
External debt is equivalent to over 75% of GDP, but Ghana has serviced
its debt, largely without rescheduling.

Trade
and Foreign Direct Investment

Trade
and foreign direct investment (FDI) are essential to Ghana's economic
development. Merchandise exports and imports as a share of GDP have
expanded substantially, from 18% and 29% in 1993 to 28% and 39%,
respectively, in 1998.

Trade
is relatively concentrated, both in commodities and markets. Primary
products, overwhelmingly gold and cocoa, account for most exports.
Non-traditional exports, including, processed food, timber, and
aluminium products, account for 20% of exports, up from 3% in 1986.
However, export diversification has slowed. Most manufactured
products, along with machinery and other inputs, are imported. Ghana's
main trading partner remains the European Union (EU), accounting for
almost half of total exports — partly due to trade preferences —
and imports. Within the EU, Italy has overtaken the United Kingdom and
Germany as the main export market. Italy, the United Kingdom, and
France are the main European source of imports.

Ghana's
regional trade with members of the Economic Community of Western
African States (ECOWAS) accounted for 17% of exports in 1999, up from
13% in 1994. Togo matched Italy as Ghana's main single export
destination in 1999. The share of African imports also rose, from 23%
in 1994 to 27% in 1999. Nigeria, the main regional source, lost
ground, its share falling over this period from 17% to 14%.

Ghana
is a net importer of services, especially of “freight and
merchandise insurance”. Travel exports increased substantially
during the 1990s, and is currently by far Ghana's largest service
export, accounting for 60% of the sector's exports in 1998.

Over
half of Ghana's inward FDI is in services. Despite a more liberal
investment regime, with new legislation aimed at extending national
treatment to overseas investors, FDI remains erratic. Registered FDI
from 1994-98 totalled US$1.5 billion, mainly from the United Kingdom,
China, United States, and Germany. Policy and economic uncertainties
in Ghana have reduced investor confidence.

In
the Government's view meeting its multilateral commitments is integral
to Ghana's ongoing reforms. Its agricultural tariffs are fully bound,
and steps are being taken to implement WTO-consistent policies on
customs valuation and intellectual property protection. Ghana looks to
bilateral and multilateral donors for technical assistance and support
in meeting these commitments.

Institutional
and Legislative Framework

Ghana
returned to parliamentary democracy in 1992. The new Constitution
vests executive power with the President and legislative authority
with the unicameral Parliament. The President is Head of State. As
leader of the Government, he also appoints cabinet ministers.

The
main ministries involved in setting and implementing trade-related
policies are Trade and Industry, Finance, and Agriculture. Several
agencies are also responsible for certain subsectors, such as cocoa,
minerals, timber, fishing, and tourism. The Divestiture Implementation
Committee handles privatization of state-owned enterprises. The Bank
of Ghana, as Central Bank, manages monetary and exchange rate
policies, determined in consultation with the Government.

The
Government promotes public dialogue through periodic forums, such as
the National Economic Forum and the Policy Forum Dialogue on
Partnership for Economic Growth, both held in 1997. A public forum on
Ghana's competitiveness is planned, based on a policy agenda set under
the Trade and Investment Reform Programme (TIRP) overseen by the
Inter-Ministerial Committee on Competitiveness. This will examine the
adverse impact on Ghana's competitiveness of remaining trade barriers,
including tariffs.

The
Government's long-term economic development plan is for Ghana to
become a middle-income country by 2020 – Ghana's Vision 2020. This
is to be met via a series of five-year rolling medium-term plans aimed
at achieving minimum real annual growth of 8%, based largely on
exports. The current plan terminated at end 2000.

The
Government's industrial development strategy is to remove bottlenecks
to private-sector development. Tariffs are to be structured to afford
reasonable protection, including reduced duties on capital goods; the
effectiveness of the duty drawback scheme is to be improved.
Subsidized loans are viewed as desirable for viable industries. The
strategy also stresses the need to establish fiscal and monetary
controls, together with central bank independence and inflation
targeting, as well as achieving a realistic market exchange rate.

Trade
Policy Features and Trends

Ghana,
a founding member of the WTO, accords at least MFN treatment to all
its trading partners. Around 15% of its tariff lines are bound, mostly
in agriculture. Its GATS Schedule covers commitments on certain
services, including tourism, maritime transport, construction, and
education. Ghana also participates in the agreements on Basic
Telecommunications and Financial Services. It is an observer to the
Plurilateral Agreement on Trade in Civil Aircraft, and is neither a
signatory, nor an observer, to the Agreement on Government
Procurement.

Ghana
is also committed to regional integration, and wishes to accelerate
such initiatives. It grants tariff preferences on many products to
other members of the Economic Community of West African States (ECOWAS),
subject to rules of origin. Ghana eliminated tariffs on most trade
with ECOWAS members by 1996, under the Community's Trade
Liberalization Scheme. A customs union and common market among ECOWAS
members are also planned. As a member of the Organization of African
Unity, Ghana remains committed to the formation of the African
Economic Community, including the creation of a pan-African economic
and monetary union.

As
a signatory to the ACP-EC Partnership Agreement (the successor to the
Lomé Convention), Ghana receives non-reciprocal tariff and other
preferences from the EU on many goods, as well as substantial
financial assistance.

Ghana
has bilateral arrangements with several trading partners, such as
Malaysia, the Czech Republic, and Côte d'Ivoire, and is
negotiating more, including with Romania, Greece, Burkina Faso,
Zimbabwe, and Libya. Old bilateral agreements involving countertrade
with former European centrally planned economies have been disbanded.
Ghana receives GSP treatment from industrialized economies, and
participates in the GSTP among developing countries. It is also
eligible for enhanced access to the U.S. market until September 2008,
under the U.S. African Growth and Opportunity Act of 2000, subject to
Ghana meeting specified criteria, such as protecting workers' rights.

Type
and incidence of instruments

The
tariff remains Ghana's main trade policy instrument. The simple
average tariff had fallen from 17% in 1992 to 13% on January 2000,
when the highest duty rate, levied on consumer goods, was reduced from
25% to 20%. However, the average tariff rose to its current level of
14.7% in February 2000 when a “special import tax” of 20% was
re-introduced, covering some 7% of tariff lines. This raised tariffs
on many, mostly consumer goods to 40%, well above their previous rate
of 25%. This contradicts the Government's policy objective of lowering
average tariffs to below 10% within the next three years.

Although
“temporary”, no time limits were specified for the removal of the
import tax. Doing so would improve Ghana's tariff structure by
reducing average duty levels and narrowing relatively wide disparities
across rates; the standard deviation of tariffs is currently 12%.

Special
import taxes have been a common feature of Ghana's tariff. The
previous such duty of 17.5% had only been abolished in
March 1999. The authorities are of the view that such taxes
protect domestic industries from what they consider “unfair trading
practices” by foreign traders.

All
tariff duties are ad valorem, thus aiding transparency. But the
widespread use of discretionary exemptions, often administered under
poorly specified authority, is non-transparent and risks providing
“tailor made” protection to some industries. Tariff concessions
also apply to specific importers, such as the Volta Aluminium Company,
and on inputs into nominated end-uses imported by approved
manufacturers. These include the making of agricultural implements and
machinery, fishing nets, pharmaceuticals, plastic pipes and bicycles.
Their rationale and administration appear unclear. A duty drawback
system operates inefficiently; refunds are slow. The Government is
rationalizing such exemptions, including the common use of bonded
warehouses, which may be contributing to duty evasion.

From
April 2000, Ghana replaced mandatory preshipment inspection with
destination inspection, performed by two private contractors.
Documentation requirements were also simplified and more targeted
inspections introduced to facilitate imports. The use of transaction
value for customs valuation purposes was implemented from February
2000, except for second-hand motor vehicles, and minimum import prices
were terminated, according to authorities. Price verification and
risk-assessment procedures are aimed at preventing duty evasion from
under-invoicing. Import clearance delays of up to seven days appear to
occur. A 1% inspection fee on imports, and an ECOWAS customs levy of
0.5% apply.

Ghana
applies few formal non-tariff trade barriers. Imported motor vehicles
older than ten years — previously subject to penalty tariffs —
were banned in 2000. Certain import prohibitions and controls apply
for environmental, health, public safety, and security reasons, and
under international conventions.

Ghana
applies no trade embargoes, nor any local-content requirements for
domestic production. Mandatory standards, set by the Ghana Standards
Board, mainly in line with international norms, do not discriminate
against imports. The Government intends to move to voluntary
standards. Test results from foreign countries are usually accepted.
Quarantine requirements apply, but do not generally appear to be a
major constraint on imports.

Ghana
has no legislation on contingency protection measures, such as
anti-dumping, countervailing, and safeguards. However, the special
import tax appears to be used for these purposes. The Ministry of
Trade and Industry monitors world markets and the impact of imports on
domestic firms so that compensatory measures can be taken.

Government
procurement is increasingly being decentralized away from the Ghana
Supply Commission. Ministries and state-owned entities procure many
goods directly, largely using non-transparent procedures. Government
directives favour public procurement of “made in Ghana” goods.
Domestic suppliers also receive a formal 12.5% price preference (since
August 1999).

Export
taxes are levied on cocoa and certain air-dried sawn timber. Gold and
diamonds from small-scale mining are exported mainly by the Precious
Minerals Marketing Corporation. Exports of logs were suspended in
1995, aimed mainly at promoting timber processing. Raw rattan and
bamboo exports are also prohibited.

Ghana
has no export quotas or voluntary export restraints, and no export
subsidies per se. However, income tax concessions assist exporters of
non-traditional products, who pay a company tax rate of 8% instead of
35%. Exporters of traditional products are also eligible for company
income tax rebates tied to their export share: the maximum rebate of
75% — for companies exporting at least 25% of their production —
also lowers their income tax rate to 8%. More generous income tax
incentives, including an additional ten-year tax holiday, now apply to
designated free-zone enterprises, which must export at least 70% of
production. Benefiting firms can be located outside the free zones.
Substantial leakage of domestic sales above the 30% permitted share
appear to be arbitrarily undermining tariff protection to domestic
industries, and facilitating tax evasion.

Ghana
has no production subsidies. Certain, mainly agricultural, activities
are assisted by tax concessions, including on investment. Cocoa income
is exempt from tax, and tax holidays of five years apply to most farm
and fishing income, and of ten years for tree crops. Hotel income is
taxed at a concessionary rate of 25%, and hotels receive duty
concessions on certain imported inputs.

FDI,
outside mining, fishing and forestry, is no longer screened, but
monitored by the Ghana Investment Promotion Centre, formed in 1994.
Only a few activities, including petty trading and taxi services, are
reserved for Ghanaians. Joint ventures are optional. Foreign investors
must have minimum capital levels of US$10,000 for joint ventures and
US$50,000 for wholly foreign-owned enterprises, unless engaged solely
in exporting Ghanaian goods. Foreign trading companies must have
capital of US$300,000, and employ at least ten Ghanaians. No
performance requirements per se exist.

Sectoral
policies

Ghana
is heavily dependent on agriculture, especially cocoa, and on natural
resources, notably minerals. Primary production accounts for almost
half of GDP; agriculture, at 40%, is the most important sector.
Manufacturing contributes some 10% of GDP.

Cocoa
production, a mainstay of the economy, is marketed by the statutory
board, COCOBOD. Cocoa marketing is being further liberalized under the
Government's efforts to revitalize the industry. The Government's
cocoa strategy, adopted in April 1999, is to progressively increase
the growers' price to at least 70% of the world price by 2004-05, by
reducing taxation and further improving COCOBOD's efficiency. Its
“single desk” export monopoly is to be partially relaxed, with
quotas introduced for private sellers, and domestic sales further
deregulated.

Offshore
fishing licences are granted only to fully domestic-owned boats using
mainly Ghanaian crew, except for tuna vessels where minimum domestic
ownership of 25% is required. Licensed foreign vessels must also sell
at least 10% of their catch to domestic processors, and transship all
fish through Ghanaian ports. The fish import ban was terminated in
1997.

Large-scale
mining is open to foreign participation. Joint ventures are not
required, but the Government receives a 10% equity and can buy another
20% equity at “fair market prices”. Royalty rates and foreign
currency retention allowances are negotiated on a mine-by-mine basis.
Mining companies receive generous capital and other tax allowances,
but pay an “additional profits tax” of 25% for earnings above a
negotiated threshold rate of return, currently set at 17.5%.
Small-scale gold and diamond mining is reserved for Ghanaians.

Deregulation
of the petroleum subsector has included the termination, in 1996, of
the oil import monopoly and the exclusive supply of locally refined
products to oil marketing companies by the state-owned Ghana National
Petroleum Corporation (GNPC). In 1998, prices were changed from
“cost plus” to “import parity”. The sector remains dominated
by state-owned enterprises. Privatization of Ghana Oil Company, the
largest oil marketer, and of the Tema Oil Refinery have been delayed,
and the GNPC is no longer a priority for privatization.

Past
policies promoted import substitution through widespread direct
government participation, including State ownership. The Government
has divested some of these interests, and intends to sell off more as
part of its re-invigorated privatization programme. Outstanding
divestments are, however, increasingly involving sensitive activities,
and several proposals, such as on petroleum, have stalled since 1997.
The Government's revised accelerated timetable covers mainly
divestiture in the transport, energy, and banking sectors, including
the State Insurance Company and the Ghana Electricity Company, by
end-2003.

Services
are the second largest component of GDP. Many basic infrastructure
services, such as electricity, ports, and water, are provided by
state-owned statutory monopolies. Basic telecomm-unication services
are supplied by a statutory duopoly following licensing of a second
national carrier in 1997. These arrangements have had only limited
success in promoting telecommunication services: neither carrier has
met its network expansion or service quality target. The Government
will consider allowing additional carriers from March 2002. The market
for value-added telecom services is open. The National Communications
Authority was formed in 1997 as the independent legislative regulator
to promote fair competition and enhanced efficiency.

Electricity,
a “traditional” export, suffered major hydro-generation problems
between 1996 and 1998, due to low water levels in the Volta Lake. The
electricity crisis severely curtailed production, including of
aluminium, which consumes over one third of Ghana's total power
supply. To improve efficiency, the Government is taking steps to
restructure the industry and increase private-sector participation.
State-owned entities, including the Volta River Authority, are being
separated into companies for the generation, transmission, and
distribution of electricity, and a National Company Grid is to be
established.

More
efficient infrastructure services should improve the competitiveness
of downstream industries, such as tourism, and encourage FDI. Private
tourism development is a government priority. Air transport is being
deregulated under the Government's "liberalized skies"
regime. Ghana has no cabotage requirements protecting coastal
shipping, but new legislation provides for their introduction.

The
Bank of Ghana grants banking licences. The freeze on issuing new bank
licences was removed in 1999. Banks must meet certain prudential
requirements in accordance with the core principles of the Bank for
International Settlements. Foreign banks may operate locally
incorporated subsidiaries. Higher minimum capital levels are
prescribed for foreign banks – defined as having below 60% Ghanaian
equity.

The
Government's Financial Sector Adjustment Programme has begun
privatizing several large state-owned banks. In 1996, 42% of the Ghana
Commercial Bank was sold, and another 40% is slated for sale, along
with 30% of the National Investment Bank. Legislation to enhance the
Central Bank's supervision and enforcement of prudential regulations
is under way. Three licences were withdrawn in 2000 from banks
repeatedly unable to meet the Bank's minimum capital adequacy ratio.
Bank rationalization and restructuring have occurred through mergers
and the closure of non-viable banks.

Foreign
insurance companies may enter Ghana as subsidiaries, subject to a
maximum foreign-equity limit of 40%. Government equity of 20% is
required, and Ghanaians must own another 40%. The National Insurance
Commission regulates the industry. It sets certain prudential and
reporting requirements, and must approve all premium increases;
currently it only intervenes in setting motor insurance premiums. The
Government intends to privatize the Ghana Reinsurance Company by 2003.

Trade
Policies and Foreign Trading Partners

Ghana
generally applies its trade policies and measures on a
non-discriminatory basis, granting at least MFN treatment to all its
trading partners. Pursuing MFN liberalization while expanding its
bilateral arrangements and deepening regional integration, would
maximize benefits, and help guard against any possible trade
diversion.

Reliance
on ad valorem tariffs, which are being rationalized, as the main trade
instrument contributes to a more transparent trading regime. Extending
the coverage of tariff bindings beyond agriculture would benefit Ghana
and its trading partners by increasing the predictability of the
tariff. Continued structural reforms, including further trade and
investment liberalization, can improve the economy's flexibility and
growth prospects.

However,
the economy remains relatively weak and vulnerable to external
commodity price movements and other shocks, such as weather
conditions. Current economic difficulties, both internal — including
the large budget deficit — and from abroad, are placing extra
pressures on the economy which may weaken the Government's resolve for
trade liberalization. Ghana's enhanced commitments to the WTO and
compliance with its obligations can help sustain such unilateral
reforms. However, Ghana's trading partners can greatly assist its
reform efforts by ensuring stable, increased access to their markets,
especially in agricultural products where Ghana's comparative
advantage appears strongest.

Government
report

Ghana has
since her first review in 1992, continued her efforts aimed at the
transformation of her economy from a largely state controlled economy
to a liberalized market economy. By Ghana's Vision 2020 development
plan, the economy is expected to attain a middle-income status by the
year 2020. This process of transformation has seen the private sector
increasingly becoming the driving force of the economy. The government
of Ghana has continued pursuing policies with the goal of creating an
enabling environment for the achievement of these objectives. These
include appropriate monetary and fiscal policies, financial sector
reforms, industrial policies and policies aimed at attracting
investments into Ghana.

The
major focus of economic policies especially since 1995 has been on
macroeconomic stabilization. To this end, recent fiscal policy
measures have centred on central government expenditure restraint and
rationalization of the tax regime. In addition, there is a policy of
zero deficit financing of the budget by the Central Bank (Bank of
Ghana). These policy measures achieved some successes by 1998.

In
the second-half of 1999 however, Ghana suffered an external terms of
trade shock. The prices of the country's major exports (gold and
cocoa) declined at the same time as oil prices on the international
market increased sharply. These developments have resulted in a
shortage of foreign exchange as well as a deteriorating fiscal
position. The exchange rate of the cedi has depreciated by 40% since
September 1999.

In
response to these external shocks, the Central Bank has further
tightened monetary policy and has increased money market interest
rates to 45% to increase the attractiveness of cedi-denominated
securities. With inflation at 20%, this implies a real interest rate
of over 20%. It is envisaged that with the necessary fiscal
adjustments, interest rates will be reduced by the end of the year.
Also, inflation is forecast to fall significantly by 2001 when the
economy would have adjusted to the external shocks. A single digit
inflation level is the objective.

Ghana
has signed on to be part of a second Single Monetary Zone in the West
African sub-region by 2003. The stability in exchange rates, which the
single monetary zone will bring, will serve to make Ghana even more
attractive as an investment destination.

Economic
and Trade Policy Environment

The
Ghanaian economy experienced very difficult economic and social
conditions during the 1970s and early 1980s as a result of severe
drought and declining world market prices for Ghana's principal
exports: cocoa, gold and timber. Cocoa production declined steadily
and reached a record low in 1984, while industrial production also
fell markedly. Consequently, real per capita income fell steadily, and
by 1983 it was only about two-thirds of its level in 1960.

The
initiation of the Economic Recovery Programme (ERP) in 1983, witnessed
the beginning of a marked transformation of the economy from an
administrative system of economic management to a market-oriented
system. This included major structural reforms in both the real and
financial sectors of the economy. As a result, there was a steady
recovery in per capita income, a sharp drop in domestic inflation, and
substantial improvement in the external balance-of-payments.

In
particular, during 1993-98, real GDP grew at an annual average rate of
more than 4%, the domestic rate of inflation fell markedly to less
than 20%, the government overall fiscal deficit declined to 8.1% of
GDP, simultaneously as the domestic primary surplus reached 3.6% of
GDP.

Except
for 1996, the overall balance of payments recorded continuous
surpluses up to 1998 and the ratio of the external current account
deficit to GDP fell steadily to 4.7% of GDP in 1998.

Since
1999, the economy has been hit by a very severe external terms of
trade shock, stemming from a more than halving of the world price of
cocoa, a marked decline in the price of gold, and a more than tripling
of the world price of oil.

Consequently,
in 1999 the balance of payments recorded an overall deficit of US$94
million, while the external current account deficit reached 10.6% of
GDP. Also, the government's overall fiscal deficit worsened to 8.2% of
GDP notwithstanding major restraint on capital outlays and the credit
depreciated by 1.5% on an annual average basis. However, with
tightened monetary policy, the domestic rate of inflation, which had
fallen to 9.4% by May 1999, ended the year at 13.8% compared with
15.8% in 1998.

Government
fiscal efforts in 1998-99 included the introduction of a value-added
tax at 10%, which was subsequently increased to 12.5% in 2000. The
year 2000 has seen the worst impact of the external terms of trade
shock. This has given rise to a massive depreciation of the exchange
rate, and sharp increases in both domestic inflation and interest
rates